Investment Opportunities with Closed-End Funds Atlanta Chapter, - - PowerPoint PPT Presentation
Investment Opportunities with Closed-End Funds Atlanta Chapter, American Association of Individual Investors December 8, 2009 John Cole Scott, CFS John Cole Scott, CFS Portfolio Manager & Executive VP Portfolio Manager & Executive VP
Atlanta Chapter, American Association of Individual Investors December 8, 2009
John Cole Scott, CFS Portfolio Manager & Executive VP Closed-End Fund Advisors, Inc John Cole Scott, CFS Portfolio Manager & Executive VP Closed-End Fund Advisors, Inc
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– Discounts.
– Intelligent Asset Allocation
– Review News on All CEFs Daily
– Also talk to fund managers
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No No* Yes!
Discount?
Tends to be lower than MF peers Yes, if the fund wishes None, manager can make investment decisions Fixed at IPO* (except DRIPs, Warrants, share buy back, etc.) Intraday
Closed- End Fund
Tend to be higher, many have upfront loads, backend loads and 12b1 fees. No* Yes, can force manager to make buy/sell decisions Constant in and out flow After 4pm post trading
Open-End Mutual Fund
Tends to be lowest No* Not really as non “management” Creation Unit Redemption Intraday
Exchange Traded Fund Expense Ratios Leverage Redemption Pressure Capitalization Trading 5
Source: Investment Company Institute
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A closed-end fund can trade above its net asset value (NAV) per share, referred to as a PREMIUM to NAV; or below its NAV per share, referred to as a DISCOUNT to NAV. The discount, equal to the difference between the share price and NAV, represents potential value.
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Source: Thomas J. Herzfeld Advisors, Inc.
Current 52 Wk Ave
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Source: CEFA Closed-End Fund Universe, December 4, 2009
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Credit Quality ranges from AA- to AA+.
NAV Yield
5.22% 5.40% 5.47% 6.06% 4.52% 4.79% 4.89% 4.99% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% NEA NIO NPX NPT NXR NUV NXQ NXP
Leveraged Unleveraged
Source: Stifel Nicolaus, September 30, 2009 Past performance is not indicative of future results. This presentation is not intended as an offer to sell any of the funds shown. Rather, funds shown are for illustrative purposes only.
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Example: Morgan Stanley Quality Municipal Securities (“IQM”)
As of September 30, 2009: Market Price: $13.33 NAV: $14.69 Discount: 9.3%
NAV and Market Price Yield for IQM
5.44% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Yield on NAV Yield on Market Price
5.97%
Discount Yield Benefit = 53 bps
Source: Stifel Nicolaus, September 30, 2009 Past performance is not indicative of future results. This presentation is not intended as an offer to sell any of the funds shown. Rather, funds shown are for illustrative purposes only.
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as of December 4, 2009
Source: CEFA’s Closed-End Fund Universe, December 4, 2009
Average Equity Fund: 6.9% Average Bond Fund 7.0%
average trading volume, good execution is an important component in maximizing your overall investment return. This also precludes many institutional investors from buying CEFs.
manager or management team.
management; Trailing %, set point or manual.
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Source: Yahoo Finance
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Source www. Cefconnect.com
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Source: Yahoo Finance, CEF Connect
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Source www. Cefconnect.com
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and in regular market situations. Wait 3-9 months.
way to increase your chance for beneficial trading decisions.
good till canceled orders.
there are no suitable open-end funds or ETFs and you HAVE to have this exposure, then you can consider buying the CEF IPO.
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Relative Discount: The current discount/premium of a closed-end fund vs. the fund’s 52 week average discount/premium. This data point is intended to help identify relative value for the fund vs. the absolute value of the current discount/premium. Example: IGA 52 Week Premium/Discount Chart
12/04/09 Chart Source: CEFconnect.com
Current:
NAV: $13.61 Mkt Price: $13.28 IGA Disc/Prem: -2.42% IGA 52 Wk Ave D/P: -1.93% IGA Rel. Disc/Prm -0.49%
Source: CEFA’s CEF Universe – 12/04/09
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There are 29 Covered Call Closed-End Funds
Average Discount/Premium: +0.53% Top Quintile (20%) +18.53% Bottom Quintile (20%)
Average Relative Discount (52 Wk): +6.62% Top Quintile (20%) +15.30% Bottom Quintile (20%) +0.33% NAV YTD Performance: +21.37% Top Quintile (20%) +35.84% Bottom Quintile (20%) +6.94% Average Distribution Yield: 11.1% Top Quintile (20%) 15.26% Bottom Quintile (20%) 7.32%
Source: CEFA’s Closed-End Fund Universe – 12/04/09
Ave Exp Ratio: 1.17% Ave Mkt Cap: $478M Ave Liquidity: $1.621M /day Ave 52 Wk Relative Price: 90 Ave 52Wk MP Return: +63.6%
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S&P 500 Covered Call Fund: BEP
Madison Strategic Sector Premium Fund: MSP
Both funds have similar relative pricing. What are their differences?
Source: CEFA’s CEF Universe – 12/04/09
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These funds have the similar 12 /mo NAV return, which fund offers a better relative value vs. risk?
Madison Claymore Covered Call & Equity: MCN
Enhanced S&P 500 Covered Call: BEO
Source: CEFA’s CEF Universe – 12/04/09
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These funds have the similar indicated yield, which fund
Old Mutual Claymore Long- Short: OLA
Dow 30 Premium & Dividend Income: DPD
Source: CEFA’s CEF Universe – 12/04/09
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Investment Company Institute – www.ici.org CEF Association – www.cefa.com Nuveen’s CEF Website – www.cefconnect.com The Scott Letter: Closed-End Fund Report – www.scottletter.com CEF Quarterly Commentary: Jeff Margolin First Trust: http://www.ftportfolios.com/Retail/Commentary/CEFCommentaryMain.aspx CEF Quarterly Commentary & Research – Nuveen http://www.nuveen.com/CEF/Info/CommentaryResearch.aspx LinkedIn CEF Network: http://www.linkedin.com/groups?about=&gid=1172377&trk=anet_ug_grppro Morningstar CEF Discussion Group http://socialize.morningstar.com/NewSocialize/forums/100000006.aspx Seeking Alpha – key word “closed-end fund” - www.seekingalpha.com Yahoo Discussion Groups Closed-End Funds: http://finance.groups.yahoo.com/group/closedendfunds/ Closed-End Funds 2: http://finance.groups.yahoo.com/group/closedendfunds2/
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CEFA’s Closed-End Fund Universe – Weekly CEF Data covering 26 data points on all US listed funds. www.cefuniverse.com - $185/ quarter or $595 / year. FundData’s FundWeb - access to database of over 2,000 Global CEFs as well as all US- CEFs. The level of detail is second to none, with all relevant fund information quickly accessible. With numerous charting and reporting functions, allowing bespoke reports to be created at the touch of a button, FundWeb provides a one- stop shop for extensive CEF data. www.funddata.com - $5,000 per quarter. Herzfeld’s Investor’s Guide to Closed-End Funds – Monthly Publications with CEF Commentary, recommendations, announcements, and firm managed accounts.. http://www.herzfeldresearch.com/ - $635 / year online or $800 / year print. Wiesenberger Closed-End Weekly Review – Weekly CEF data covering 13 data points per fund. http://www.site-by-site.com/usa/cef/subscriber.htm - $79.95 / quarter or $239.95 / year.
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John Cole Scott, CFS
Portfolio Manager, Executive VP Closed-End Fund Advisors
John is a Portfolio Manager and Executive VP for Closed-End Fund Advisors where he has worked for 9 years. He sits on the firm’s investment committee holds the Series 66 License and the Certified Fund Specialist designation (CFS). He is a graduate of The College of William and Mary. John has been quoted in SmartMoney, Investment News, Bond Buyer, USA Today, The Richmond Times Dispatch and published in SR Consultant. He has presented at conferences in Atlanta , GA , Boca Raton, FL , Charlotte, NC, New York, NY , Richmond, VA and Washington DC including several keynote addresses. In 2008 John founded CEFA's Closed-End Fund Universe, a comprehensive weekly data service covering the closed-end fund industry. He is a long time member of The Richmond Association for Business Economics (RABE), serves on the Investment Committee for The New York State Society of The Cincinnati and is Treasurer and Membership Chair for The Virginia Museum of Fine Arts’ Business Council. He and his wife Shannon reside in Richmond, VA.
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Important: The information in this presentation is not for general circulation and should not be considered an offer, or solicitation, to deal in any of the mentioned funds. The information is provided on a general basis for information purposes only, and is not to be relied on as advice, as it does not take into account the investment objectives, financial situation or particular needs of any specific investor. Any research or analysis used to derive, or in relation to, the information herein has been procured by Closed-End Fund Advisors (“CEFA”) for its own use, and may have been acted on for its own purpose. The information herein, including any opinions or forecasts have been obtained from or is based on sources believed by CEFA to be reliable, but CEFA does not warrant the accuracy, adequacy or completeness of the same, and expressly disclaims liability for any errors or omissions. As such, any person acting upon or in reliance of these materials does so entirely at his or her own risk. Any projections
companies are not necessarily indicative of, and may differ from, actual events or results. No warranty whatsoever is given and no liability whatsoever is accepted by CEFA or its affiliates, for any loss, arising directly or indirectly, as a result of any action or omission made in reliance of any information, opinion or projection made in this presentation. The information herein shall not be disclosed, used or disseminated, in whole or part, and shall not be reproduced, copied or made available to others without CEFA expressed written permission. CEFA reserves the right to make changes and corrections to the information, including any opinions or forecasts expressed herein at any time, without notice.
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John Cole Scott, CFS Closed-End Fund Advisors 7204 Glen Forest Drive, Suite #105 Richmond, Virginia 23226 Phone: (804) 288-2482 / (800) 356-3508 Email: jcs@cefadvisors.com www.cefadvisors.com